SCENARIO

Applying the Rules

Val-Nam and XL have entered into a contract for the sale of 100 portable electricity generators. The contract does not specify when the title to the generators will transfer to XL. While the generators are sitting on Val-Nam's loading dock, there is a fire in the warehouse and the generators are destroyed. Consider the following different circumstances and their effect on the transfer of title:

XL's purchasing manager called Val-Nam stating that XL was in desperate need of 100 generators immediately. Val-Nam's sales manager, Gyan Singh, tells the purchasing manager that he has a pallet of 100 generators sitting on the loading dock that XL can have at the regular price. The purchasing manager says XL will take them. The generators are to be delivered the next day. Who had title to the generators when the fire broke out?

Under the contract, the purchase price will vary depending on the average wattage of the generators. Val-Nam has agreed to test a random sampling of the generators and the purchase price will be set based on the average wattage of the random sampling. Val-Nam conducted the tests and placed the generators in the loading dock for shipment but has not yet confirmed with XL that the tests were completed and what the final purchase price will be. Who had title to the generators when the fire broke out?

XL's purchasing manager called Val-Nam and placed an order for 100 generators. Gyan Singh explained that Val-Nam is currently out of stock but that they should be getting new stock the following week. The parties agreed that Gyan would email XLwhen the generators were ready for shipment to XL. When the generators arrived at Val-Nam the following week, Gyan separated 100 from the shipment and placed them on the loading dock. They were wrapped and labeled for delivery to XL. Gyanemailed XL indicating that the generators were ready for shipment. Who had title to the generators when the fire broke out?

According to the terms of the contract, Val-Nam was to repackage the generators inXL-branded packaging. The generators had not yet been repackaged when the fire broke out. Who had title to the generators when the fire broke out?

Now consider this circumstance: Each month, Val-Nam delivers 100 generators to XL. Under the terms of the contract, XL has the right to return any unsold generators within 30 days of delivery. There are no terms in the contract relating to the transfer of title. On April 10, Val-Namdelivers 100 generators to XL. On April 11, XL's store is broken into and 10 of the generators are stolen. Who had title to the generators when they were stolen?

MINIMIZING YOUR RISKPlan for Passage of Title

Determine when you and the other party to the contract intend to assume and relinquish the rights and responsibilities of ownership.

Specify this time in your contract.

Review your more informal contractual relationships (for example, sales that are recorded by way of invoices only). Be aware that the five rules under the Sale of Goods Act will prevail unless you specify an alternative time for the transfer of title in your informal sales contracts.

please answer the question as to who had title and identify which Rule(s) apply for each of the 5 scenarios identified.

Reference: Canadian business law 3rd edition by Tamra Alexander (Chapter 6)